Positive markets shore up equity assets: CRISIL

ET BureauApr 20, 2009, 02.11pm IST

MUMBAI: The market rally finally came to the rescue of mutual fund equity schemes, badly hit by market meltdown. Mutual funds' equity assets recorded a positive growth in March 2009 after declining for two consecutive months. This was on account of a sharp rebound in the Indian equity markets, with the S&P CNX Nifty registering over 9 per cent, its steepest rise in 17 months.

Equity returns in March were driven by a sharp rise in metals stocks (up 24 per cent), oil and gas stocks (up 16 per cent) and automobile stocks (up 14 per cent), said Krishnan Sitaraman, Director - CRISIL FundServices.

As per SEBI data, mutual funds were net buyers of equities in March 2009, purchasing equities worth Rs 15 billion as against net sales of Rs 15 billion in the previous month. Also, the net equity purchase in March 2009 was the highest since September 2008 (Rs 23 billion net equity purchases).

The rise in equity assets happened even as the mutual fund industry's overall average assets under management (AUM) shrunk marginally from Rs 5.02 trillion in February to Rs 4.94 trillion in March in the current year after witnessing three months of continuous growth.

The month-end AUM witnessed a steep 18 per cent fall with March end AUM at Rs 4.17 trillion compared to Rs 5.09 trillion in February 2009. This was mainly on account of large scale redemptions from fixed income funds, driven by banks paring holdings and corporates redeeming to meet advance tax payments.

According to CRISIL FundServices, the withdrawal by banks could have been primarily to enhance capital adequacy levels at the financial year end. This is because investments in mutual funds attract a higher capital charge for banks as compared to investing in other short term avenues like treasury bills and collateralized borrowing and lending obligations (CBLOs).

Debt funds, including ultra short term debt funds, were the biggest losers, losing Rs. 622 billion in AUM, while liquid fund assets were down by Rs 370 billion. "We expect a considerable portion of the redeemed amount to be reinvested back in debt and liquid funds in April, on account of easier liquidity conditions," feels Sitaraman.

Among CRISIL indices, equity oriented indices topped the monthly returns chart in line with the positive sentiment in the stock markets. CRISIL Fund~eX, which tracks diversified equity funds, posted the highest monthly gain of 7.5 per cent in March 2009 followed by CRISIL Fund~bx (balanced fund index), up 6.5 per cent over the previous month.

CRISIL MIPEX (benchmark for monthly income plans) posted 1.1 per cent returns while CRISIL STBEX (benchmark for short-term bond funds) and the CRISIL~LX (tracks liquid funds) gained 0.13 per cent and 0.55 per cent, respectively, over the previous month.